The weekly newsletter for everyone interested in barter--the world's most versatile business tool!
August 20, 2002
Written by Bob Meyer, Editor of BarterNews
"The deceit, greed, and preposterous claims to wealth that characterize the managements of many large corporations today have little to do with the values of entrepreneurship as embodied in small and growing businesses."
--Carl Schramm, President & CEO of the Ewing Marion Kauffman Foundation, one of the top 25 foundations in the U.S. and the largest focused solely on entrepreneurial success at all levels.
the keynote address to the Young Entrepreneurs' Organization in Washington
(DC) last Friday, says the scandals rocking executives at a handful
of companies in the stratosphere of corporate American should not be
confused with the work of the tens of thousands of "real entrepreneurs"
who are crucial to the future economic growth in the
In underscoring the importance of the entrepreneur's role, Schramm said, "I believe that the entrepreneur may hold part of the solution to the current crisis. But, if we are not careful, the reaction of government--with its regulations aimed at the miscreants in big business--will make the burden on entrepreneurs much heavier, in that it's going to make the world in which we operate more difficult.
"Real entrepreneurs are not members of the pampered business elite," he said. "They must be close to their markets, to their engineering, to their production, to their distribution. They must face skeptical capital where it is presumed that new, small and untested companies will fail. They must judge the cost of capital in ways large companies, routinely having access to the easy money of bankers willing to suspend disbelief, cannot imagine."
Peoplesoft Affirms: No Barter Transactions
Such Announcements Give Public Wrong Impression of Barter
An August 14th press release by PeopleSoft reaffirmed that the company does not participate in barter deals.
CFO Kevin Parker
exclaimed, "We do not participate in any material swap, barter
or other form of offsetting transactions. In addition to these practices,
requiring vendors, suppliers and business partners to purchase software
as a condition of doing business can also inflate financial results.
PeopleSoft's current business practices and corporate governance
Editor's Note: Long before the accounting scandals broke at Enron Corp. and Worldcom, dot-com companies were already coming under fire for the way they stretched the truth about everything from the size of the markets they served to the amount of revenues they booked. During the dot-com's go-go days in the late 1990s online sites were swapping ad space on one content site for space on another, and then booking it as revenue.
The "swaps" of fiber-optic capacity--and improper accounting of such deals--to falsely boost a company's revenue during an industry slowdown (what Quest, Global Crossing and Worldcom did) and now pointed out in the press as "barter deals" is misleading, too.
Because the culprit is not barter--the versatile business tool--but the executives who chose to improperly account for these "swap" deals and then overstate their revenues. These fraudulent actions are not only bad business for the companies practicing it, as well as their shareholders, but it's also harmful to the commercial barter industry.
Everyone connected with the barter industry should understand the improper accounting differences, and be ready to defend and explain the correct use of barter. In short, we must provide the press and the business community with this simple message: When a company wants to barter and maintain a transparency, they should handle their barter transactions through the barter industry's third-party record keepers.
Should Service Fees Be Paid In Trade Or Cash?
Last week, in the Here & There section, we reported that Barter-bay.com is changing its service fee structure from cash to 100% trade.
The following is a response from Terry Brandfass of BXI Arizona...
OK...why don't all of us (running trade exchanges) take our fees in trade?...definitely a fair question that deserves a fair answer.
Having been in the barter business for approximately 25 years, I've seen MANY trade organizations come and go. When I first entered into the business, it was with Exchange Enterprises. They took their fees in trade. Birthed from them, was Barter Systems International. They also took their fees in trade.
I learned everything on how NOT to run a barter organization from Exchange Enterprises...one of them was that NO business can survive on barter alone.
Exchange Enterprises had a strong national retail exchange base. The numbers they did on a monthly average in those days was staggering...we were in Tucson, AZ with approximately 400 clients. We did between $1,500 to $2,000 per client per month...AND that was in 1978/79.
However, on the flip side...how did all of the cash bills get paid? You had to pay the sales people a commission on that cash membership that many times included a trade component. You had to pay your brokers a salary. You had utilities...phones...etc. AND then you had taxes...the giant killer that brought both Exchange Enterprises and Barter Systems tumbling down.
I also observed large amounts of inventory being purchased out of the system with corporate company credits for inventory they would then cash convert, and use to stay a float. This took precious inventory (always the good, hard product) out of the hands of the clients.
We saw the handwriting on the wall in time to get out. It was only a matter of months, when we were in an airport, watching the corporate heads of Exchange Enterprises being interviewed on Night Line and being torn to pieces. Shortly thereafter, only a matter of months, Barter Systems International also came tumbling down.
None of it was a pretty sight. Our whole industry took a big hit. We had to work very hard to pull the industry back up again. I credit most of the hard work to the group of dedicated people inside of IRTA. It was a rude awakening for many when trade secrets had to go, to be replaced with working relationships as the wave of the future.
Yes, our industry has a long way to go....but...we've come a long way baby, look at us now!
of BXI Arizona
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Regarding our comment last week on the danger's of charging 100% trade service fees, Reid Nunn of Barter-bay.com wrote:
"Your comments about the downfall of taking fees in trade are well noted. Not to counter what you say, because it is 100% valid, is the fact that it is very difficult to collect cash fees from many people far away. Those who will pay, will. Those who won't, it's not worth the cost of collections. But the real problem is that those who don't pay are no longer trading, and their trade dollars are not flowing.
"If a person (trade exchange owner) is dependent upon the cash flow from fees to live on, this (method of collection) should not be done. However, if they have other sources of income as I do, then it is a great way to EARN credits to use to trade within one's exchange. The more I earn in trade fees paid in trade, the more I have to spend in my cash businesses to increase my cash profit.
"Public reception has been tremendous, and Barter-bay.com is growing faster than ever, with more and more trading activity daily. Plus, I spend less time on it."
Here And There. . .
This Issue's Glossary of Terms:
We welcome your comments, questions, and observations.
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